Why I Have Life Insurance
Today, Life Insurance Awareness is the topic. There will be at least 100 blogs written on this topic today alone to emphasize the importance of life insurance.
I knew I needed to evaluate my personal financial plan once my wife and I decided we were going to start having children. One part of that plan was to make sure our family would be taken care of, financially, if I died before we built up a college fund for our children, had a paid for house, and had enough savings built up so that my wife could raise our children if I was no longer around to provide an income.
My Reasons For Buying Life Insurance:
- To financially provide for my family.
- I do not have sufficient savings to replace my income.
Other Reasons To Buy Life Insurance:
- Provide money to buy a house or pay off a mortgage
- Provide money to pay off debt
- Provide for burial costs
- Provide a college fund
Who Needs Life Insurance?
At a minimum, anyone who has someone who financially depends on them needs to have life insurance.
How Much Life Insurance?
While there is no agreed upon standard amount of coverage to buy, a typical rule of thumb is between 2 to 10 times your annual income. I chose 10 times my annual income so that once college funds are established and a house was purchased, my wife and family could live off of the interest earned from the invested life insurance proceeds. I have been able to purchase this amount of Term Life Insurance for about the same as my family’s monthly cell phone bill.
When To Buy Life Insurance?
The cost of life insurance is based on your risk profile. Some factors the insurance company will consider how long you want the policy to be effective, the amount of coverage, your age, and your health. Typically, the younger and healthier you are , the lower your premium will be. Even if you are not in ideal health, you should be able to get affordable coverage. I waited until I was in my mid-thirties to purchase coverage, after having cancer, and I can still afford the coverage.
How Long Of A Policy To Buy?
I plan to have life insurance in place until the savings in our accounts is enough to provide for my family’s financial needs. Once the goal of self-insuring has been accomplished, I will cancel the policy. I currently have a 30 year level term life insurance policy in place.
Be sure you shop around – I used to think the coverage that was provided by my employer was sufficient, that is until they decided to cut it from two times my annual salary to $25,000. So, since I needed to do something, I looked at purchasing additional life insurance through my employer and requested quotes from an independent insurance agent – the independent agent was actually less expensive than what I could get through my employer.
Be prepared to wait – Between the questionnaires, physical, and additional documents needed, it may take 60 days or more to get a new policy in place. If you are currently covered through your employer don’t wait until the last-minute to compare policies, do your shopping well in advance of your open enrollment period so you can choose the best deal for you.
Be aware of other insurance – Some memberships, like banks and credit unions, will provide a small amount of life insurance coverage if you die so be sure those amounts into consideration when you are calculating how much insurance you will need to purchase. Also, for those in the USA, you may want to consider your available Survivor benefits provided through the Social Security Administration.
Additional information: Why Do I Need Life Insurance?
Be sure to follow the Twitter hashtag #LifeAware for additional blogs on life insurance.